Intraday Stock Trading

 

RobertBuran1 Intraday Stock Trading   By Robert Buran

 

 

 

Intraday Stock Trading does NOT mean just day trading.

To understand how I use the term Intraday Stock Trading it is first necessary to define some terms.  The conventional definition of  “day trading”, means buying and selling a stock within the same day. Day traders typically carry very large positions in order to make profits by leveraging large positions that will make a lot of money with just small price movements.  Day traders need a combination of high liquidity and volatility for all this to work.  Volatility is measured by the daily range and the larger the range the larger the potential profit or loss.

Intraday Stock Trading21 300x208 Intraday Stock Trading

Intraday Stock Trading

 

Intraday Stock Data

However over 20 years ago I became interested in intraday  data, not for purposes of developing day trading systems, but as a way for developing strategies for short term stock trading.   Intraday data became an indispensable tool making it possible to make 2 and 3 day trading systems far more sophisticated than ever before.

 

When most traders hear the phrase Intraday Stock Trading they think of day trading.  I have never liked day trading because I have found that day trading systems that I have developed, although marginally profitable, make more money if they are held onto for an extra day or two.

There was a time when day trading had some appeal because brokers allowed a day trader to trade more positions with less money because, or so the reasoning went, there was much less risk if no trades were held overnight.  Hence a trader with limited funds could still trade significant position size as long as he was out of his positions at the end of the day.  The bottom line was that a day trader could leverage his positions more than could a position trader.

But alas in 2013 this is no longer the case.  Day traders became like the perceived communists of the 1950s and got blamed for all the stock market melt downs of the first decade of the 21st century.  Of course day traders had nothing to do with those melt downs, but the government that has never understood the dynamics of market behavior anyway, nevertheless instituted many restrictions designed to restrict day trading.

First and foremost among these restrictions is a rule that requires “pattern day traders” to have trading accounts of at least $25,000.  If the account of a “pattern day trader” falls below $25,000 the account must, by law, be closed.  Of course the rule makes no sense at all and to my knowledge nobody has ever asked the logical question, “How is it that people with less than $25,000 to trade could have caused a world wide melt down of virtually all equity markets?”  Nevertheless day traders were in reality “little guys” with no political clout and consequently they made easy scapegoats for the government.

Regardless, in 2013, there is no good reason to day trade.  Today day trading will cause you to need more money to make less.

This pattern day trading rule never has really affected me because I do not day trade.  But I did have to eliminate most of my day of entry stops so that neither my broker nor the government would ever perceive me as a day trader.  Surprisingly the elimination of day of entry stops has not degraded the performance of my two and three day short term trading systems.  (For more interesting details on trading without stops (please see my article, Stop Loss Order).

So if I am not a day trader why am I interested in intraday stock trading?

The reason is very simple.  Intraday data gives the trader the opportunity to better control his positions even if he holds his positions, as I do, for two or three days.  In order to understand what I am talking about let me first share with you just one general observation about markets.

I have said many times that I believe markets are predominantly random.  HOWEVER, it is also my observation that the markets are more random at the beginning of the day and less random at the end of the day.

To work with this observation it is very important to be able to observe intraday data and plan entries and exits based on time frames other than daily bars.  My trading system, Jordi’s Intraday 2 (please see automated stock trading software), does in fact use two time frames, daily bars AND 15 minute bars.

Using intraday data, 15 minutes bars, is very important for my trading system even though I do not day trade.  On Friday July 9, 2010 when the market opened my open trade equity was negative $5,000 but in only 10 minutes it went from minus 5k to positive 20k!  Like I say the market is very random at the beginning of the day and I have programmed my system never to enter or exit a trade in the first 15 minutes.  On that same Friday I closed out all those positions with a nice profit of $24,000.  Can you imagine how upset I might have been had I exited all those good trades when they were negative five thousand dollars?

Furthermore if you read my article, Stop Loss Order, you will note that I prefer TIME STOPS over PRICE STOPS.  Obviously Price stops are based on price only whereas my time stops combine price AND time, which of course requires intraday stock data for calculation.  If I was using only price stops on Friday I would have been stopped out of my positions at the worst possible time.

Intraday Stock Trading3 Intraday Stock Trading

Intraday Stock Trading 3

But by writing time into my stops I avoided the wild random price swings at the beginning of the market day and took $24,000 in profits towards the end of the day when the markets are far less random.  My intraday trading systems are unique because they combine two data streams, daily AND 15 minute bars, and this allows me to trade a vastly superior trading strategy and still hold trades beyond a single day.

But the real point I wish to make here is that Intraday Stock Trading does NOT mean day trading.  I am a short term stock trader, but I am NOT a day trader or a swing trader and even though I hold positions for as long as three days I AM an Intraday Stock Trader and I am glued to 15 minute bar data throughout the market day.  Using intraday data in this manner gives me an enormous advantage over most other traders.

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 Intraday Stock Trading
I am a trading system pro and have been trading markets and have been involved with trading system development and the programming of trading system software for 25 years. "Today Stock Market" is my opportunity to share with you some of my trading experience while discussing stock market news and giving my daily stock market update.
 Intraday Stock Trading

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